I don’t think I’ll surprise anyone by saying that buying a new car was my worst financial blunder. Who am I kidding? I even bought two! Yes, I made the mistake twice! As a matter of fact, I talked about it recently on the 20 ans, pas l’temps? podcast (french only). 😉

Shortly after my second purchase, which seemed quite reasonable at the time, reading En as-tu vraiment besoin? (english version: Do You Really Need It?) by Pierre-Yves McSween was like a slap in the face. It especially stung as I had had my new car for only about a month. Suddenly, the purchase seemed much less reasonable. Unfortunately, the damage was done and the car was already worth less than the balance of the new financing, as soon as I left the dealership lot.

I’d fallen into the lifestyle inflation trap. I was earning a good salary for my age and I felt that I “deserved it”.  That’s not to mention how much the auto industry goes out of its way to make sure we fall in that trap. McSween explains it especially well in his book (loose translation):

The auto industry fights vehemently to push the consumer out of the world of rationality. We use a fraction of the car’s useful life, but we pay the greatest annual cost. In fact, the price of a car is so high that, we prefer to forget its real price. What is being sold is a monthly, biweekly, weekly, or simply a lifestyle payment.

The many other personal finance books I read afterwards all had a fairly similar opinion. It only confirmed how wrong I had been. Besides not being too proud of myself, I felt stuck with my new car, since getting rid of it would mean selling at a loss, not to mention that I actually needed a car.

So for anyone thinking of buying a new car, let me tell you why it would be better to buy a (relatively) old car.

Those Damn Car Payments

Let’s take a look at how much my last seven years of car payments really amounts to.

To start, I bought my first new car in May 2014, which was a month after I finished college and landed a high-paying job. Classic, right?

Then, I switched in December 2016, after an aggressive offer from the dealership. The new loan included a portion of the previous car’s balance, since the value of the previous car was not enough to pay off the entire old loan. Crazy, huh? They’re passing this off to customers who think it’s just normal or fair. Everyone else is doing it!

In order to get a complete picture, I reviewed my bank statements. I calculated that I have spent about $35,000 in car payments so far. Add to that my current balance of about $7,000 as of today. So once the loan is completely paid off in November, I’ll have paid a total of $42,000.

Now, what will I have seven years and $42,000 later? A 5-year-old car worth less than $10,000 that will continue to depreciate and will require more and more maintenance.

Depressing, isn’t it?

If you had any doubt that a car was not a good investment, I hope this confirms it. In fact, it proves perfectly how a car pays a guaranteed negative return. Ironically, it’s often the people who buy new cars over and over again who’ll say the stock market because it’s too risky. 😉

The Opportunity Cost

Let’s now analyze the opportunity cost, i.e., the return I did not get by making my payments on these two cars, rather than investing the money. To do this, I will use this compound interest calculator.

Yes, we’re not done being depressed. I’d even say that it is a borderline masochistic exercise.

So, that $42,000 in car payments over about 7 years averages out to $460 per month. If I had invested those payments in the stock market with an 8% return (which was absolutely realistic from 2014 to now), I would have gotten :

So instead of a car worth roughly $10,000, I could have $51,572 more in my nest egg. We’re talking about a difference of $41,572. Of course, this difference takes into consideration that I wouldn’t have had a car at all. If you add in the purchase of a used car and its maintenance, the gap narrows. But you get the picture. It would never have cost me $42,000 over seven years for a used car.

Let’s Push the Torture Further

That was a good reality check, wasn’t it?

Let’s cry some more. Let’s add to this the compound interest on that $51,572 until I’m 65, which is 30 years after I finish financing my car. That’s without adding a dime to it.

Ouch. It’s getting quite expensive for that new car smell.

And finally, if I were to continue investing $460 a month until I was 65, as if I was continuously changing cars every couple of years:

Now, you can see the huge opportunity cost that comes with car payments over several decades. I will stop the torture at 65, but you get the idea. It’s not going to get any better by adding more years.

We all know someone who changes car every 4-5 years once the financing ends or the lease is up. Well, those people might need to do that kind of math to see how much that new car smell really costs.

Especially since, at the end of the day, the result is always the same, no matter when you decide to break the cycle. All we’re left with is a used car that will continue to depreciate (and leave us depressed).

A Good Learning Opportunity

If you decide to do the same exercise I did, you may find it hard to see the positive side of this.

Personally, I’m just glad I learned my lesson. It’s a shame I literally wasted so much money, but what’s done is done. It’s unfortunately irretrievable, so let’s not dwell on it and move on. 🙂

We make mistakes, but we’re human – and maybe that’s the word that best explains us.

– Captain James T. Kirk

If I’d never gotten into personal finance, maybe I’d have continued repeating the cycle over and over again, like most people. So I’m glad I’m getting away with only seven years of car payments, rather than decades. I’m also glad I didn’t fall into the luxury car trap. All the previous calculations would be much worse if I’d purchased a more luxurious car.

Also, fortunately, I now only have 17 bimonthly payments left to make! At the end of the financing, my 5-year-old car should be faithful to me for several more years. I will try to maintain it religiously so that it’ll last me as long as possible. After that, the next car, if I still need one, will definitely be used and certainly not financed.

The other great news about the imminent end of my car loan is that I will then allocate these funds directly to my savings. My savings rate should then increase… by about 20%! This will be very beneficial in achieving my goal of financial independence. 🙂

Conclusion

That was it. That was my worst financial mistake and all that it implies or could have implied in terms of opportunity cost. I advocate being honest as much as possible on this blog, and that means talking about the good moves as much as the bad ones. I’m not perfect, far from it, and maybe some less glowing examples will comfort you about your own missteps.

And that’s not all, I could give you other examples. Particularly, I haven’t (yet) touched on all the money I’ve spent at Comiccons or the various official Star Trek conventions in the US that I’ve attended. These are wonderful memories, but it certainly wasn’t free. 😉

What about you? Have you made similar bad financial mistakes? Have you calculated the opportunity cost, or are you not as masochistic as I am? And have you made peace with your mistake?

Please let me know!

No, I don’t have an emergency fund.

Don’t throw tomatoes at me, please. I already know all the financial gurus of this world would be outraged.

Actually, I’ve had a funny ongoing thought process about emergency funds. Like any good average Quebecker, I’ve lived from paycheque to paycheque. At the time, I had no spare change between my income and my expenses and, of course, no emergency fund.

Then, when I started getting into personal finances, I followed Dave Ramsey’s baby steps, among others. So, I started by building up a small emergency fund of about $1,000, and then started working on paying off my student loan. Once the student loan was paid off in full, I built a proper emergency fund.

Then, with the influence of the FIRE movement, I began lowering my expenses, increasing my income and investing my savings massively. Suddenly, my emergency fund felt like a dead weight. After the pandemic was declared in Mars 2020, falling interest rates certainly did not help this sentiment. Not long after, I decided to invest the entire thing in April 2020.

Since then, I no longer have an emergency fund. And you know what? I can still sleep soundly at night.

What Is an Emergency Fund?

As for many other personal finance notion, opinions differ widely about the emergency fund, especially its size. However, we often hear about having the equivalent of 3 to 6 months’ worth of expenses in cash or at least easily accessible. Of course, the more unstable our income or employment situation is, the more we need to stack in our emergency fund. For some, it might be safer to have up to 12 months’ worth of expenses, for example.

The goal here is to be able to cover expenses for a certain period of time following hard times or to absorb an unexpected specific expense.

In my case, I have a very stable job with a predictable and secure income. Accumulating more than 3 to 6 months would really be overkill. Currently, my monthly expenses are around $2,000, including my car payments. Therefore, you would expect for me to have between $6,000 and $12,000 in cash, easily accessible. By “easily accessible,” we generally mean a simple savings account.

As always, it’s on a case-by-case basis.

Who Should Have an Emergency Fund

Think about it. Who really needs an emergency fund? Who would be at risk of going bankrupt after a major unexpected expense? Who might lose their home after losing their job?

Ironically, these are the people who live paycheque to paycheque. For them, the slightest problem could very well break down their cash flow. In such a context, an emergency fund is essential. However, since these people are already living from paycheck to paycheck, it is very difficult to build one in the first place.

However, for a person who already regularly saves a large portion of their income, an emergency will not compromise their basic needs.

As mentioned earlier, my monthly expenses are about $2,000 compared to an average monthly income of $3,500. That means I already have a good amount of leeway in case of an emergency.

Opportunity Cost

What I don’t like about the emergency fund is the return I don’t get while the money is not invested. I really like for my money to work for me.

As we all know, interest rates on savings accounts are currently at historic low levels. For example, Tangerine generously gives me an incredible 0.10% interest rate right now.

Of course, I am aware that some online banks offer (temporary) promotions of maybe 1 to 2%. However, this implies that you have to constantly move your money from one bank to another once the promotion expires. Personally, I find that it takes too much time and energy for a meager 1 or 2%.

In a single year, my hypothetical $6,000 to $12,000 emergency fund would earn $6 to $12 in interest in my Tangerine savings account. On the other hand, if it were invested in an index ETF, it could make a much better return. Even with a rather conservative hypothetical return of 6%, I would be making about $360 to $720. That’s 60 times more than my savings account at Tangerine!

Add to that compound interest from one year to the next and the opportunity cost only increases exponentially.

I don’t know about you, but the difference pains me.

Inflation

Add inflation to the mix and I may start to cry. Because while my hypothetical emergency fund is earning its meager 0.10% interest, inflation is wreaking havoc at an average of 2% per year. Probable more in the years to come.

So, if I let my emergency fund sit there too long, it will only lose purchasing power, year after year.

To keep the same purchasing power and have an equivalent emergency fund from one year to the next, I would theoretically have to add to it every year. Each additional amount added each year would in turn be subject to the opportunity cost and inflation.

As you can see, inflation keeps me awake at night more than stock market fluctuations. To me, money that is not invested is 100% guaranteed to lose value.

Can the same be said for money that is well invested in the stock market?

Safety Nets Already in Place

In 2018, I was already questioning the relevance of my emergency fund. In December, more precisely, I was briefly off work after a case of appendicitis. Despite a month without working, I never had to dip into my emergency fund. Indeed, I was lucky enough to have a short-term disability coverage through my employer.

However, even if I didn’t have such coverage, my expenses were low enough to be almost entirely covered by EI Sickness benefits.

This made me start thinking about all the systems already in place for emergencies. You have to think about all these safety nets that you may already have. You’ve probably guessed it, but insurance plays the main part. After all, why do we buy insurance in the first place? Usually, it’s to cover unexpected and random events. In other words, emergencies.

Some examples of such systems include the following:

• Private insurance:
  • Home;
  • Automobile;
  • Loan;
  • Critical Illness;
  • Pets (it’s a thing!);
  • Travel;
  • Etc.
• Group insurance :
  • Short Term Disability;
  • Long Term Disability;
  • Critical llness;
  • Extended Health;
  • Etc.
• Public programs
  • Employment Insurance;
  • The Commission des normes, de l’équité, de la santé et de la sécurité du travail (CNESST);
  • The Société de l’assurance automobile du Québec (SAAQ);
  • Disability Pension from QPP or CPP;
  • Etc.

We cannot deny it. In Canada, we already have many safety nets. Since March 2020, we have even seen how generous our governments can be in times of crisis.

Add to that our own private or group insurance and we start having a lot of backups against emergencies.

Of course, if you don’t have any private or group insurance, then an emergency fund could really be relevant. This allows you, in a way, to self-insure.

What Is an Emergency

Think about it. What could go so wrong in your life that you would have to dip into an emergency fund?

The main emergencies that come to mind are, but are not limited to :

• Job loss;
• Disability;
• A sick family member;
• A major home expense;
• A car problem;
• Veterinarian fees;
• Etc.

We’re really talking about emergencies here. Not Christmas expenses or a can’t-miss discount on a trip abroad.

In short, imagine what kind of emergency could happen in your life. Which of these scenarios would be covered in part or in full by insurance that you already have, directly or indirectly?

Finally, what kind of emergency would you really have to cover exclusively with your emergency fund?

Now, if you didn’t have an emergency fund, would you be able to take pay for it with a credit card or with a line of credit, temporarily? Would you be able to pay it back fairly quickly with your excess cash flow normally dedicated to savings?

Of course, this kind of strategy requires excellent credit management. If you carry a credit card balance from one month to the next and are already choking on astronomical interest charges, this strategy is definitely not for you. In fact, go back to Dave Ramsey’s baby steps.

Finally, if the worst that can happen to you is to temporarily reduce your savings to cover an emergency, you’re really not in such a bad situation.

The Ultimate Loophole

Finally, underconsumption and frugality are, in my opinion, the ultimate loophole to exploit in order to survive an emergency.

Earlier, I mentioned my average monthly expenses of about $2,000. That’s already pretty frugal to some people. However, if a real emergency occurred, I could cut some non-essential expenses (SAQ, Netflix, Spotify, charitable donations). I could also sell my car to pay off my loan in full, in addition to no longer having any expenses related to my car (licence, plates, gas, maintenance). If I brought this down to the bare minimum, it could total about $1,000 in monthly expenses.

Then, in the event of a job loss with EI eligibility, I could have weekly taxable benefits of $595 or approximately $450 net. This would actually be enough to cover my expenses.

What if I lose my job without EI eligibility? With such low expenses, even a minimum-wage job would be enough to support me.

If there’s an urgent expense without job loss (visit to the vet, an appliance broke down, etc.), then the difference between my income and my expenses could easily pay for it.

Keep in mind that having a frugal lifestyle, even if only temporary, can help make a difficult situation much more tolerable.

Worst-Case Scenario

I know that some anxious or pessimistic people tend to imagine the worst.

Thus, they may bring up worst-case scenarios. For example, what happens in the event of job loss, in addition to a critical illness with no insurance coverage?

First of all, I wouldn’t wish that on anyone. Furthermore, anyone facing this kind of situation will not get away with a mere 3 to 6-month emergency fund, unfortunately.

However, Employment Insurance does pay 15 weeks of sickness benefits, and then QPP (or CPP) provides a disability pension in the case of a serious and permanent illness, and this, at any age.

After that, well you might need to dip in your nest egg. But then, at least you do have a nest egg, huh?

More importantly, what are the chances that this type of situation will really happen? No one is entirely protected against that, I agree. However, I don’t see the added value of living in fear of such a scenario.

Like Mr. Money Mustache himself said pretty recently about the advice he would give to his younger self:

Yeah, I thought about that a lot. I do have an answer and it’s just, “You don’t have to worry.”

I lost some sleep over that situation and then I just described and I was stressed out and there was nothing to worry about. In the very-very worse situation, I still have way better financial situation than the average person does today, even with a really good job. […] I think most people, especially analytical people, they just worry too much about everything.

To Each Their Own

I thought long and hard about all of the above before I fully invested my emergency funds last year. With the pandemic, I think we’ve all had to envision many worst-case scenarios. Personally, it made me realize that even in some of the worst cases, I didn’t really feel the need to have so much cash on hand.

So that’s why I don’t have any emergency funds at the moment. This way, I can inject 100% of my savings in the stock market and I don’t have any money that is prone to lose purchasing power due to inflation.

However, I am well aware that this strategy does not apply to everyone. Some people sleep better at night knowing that they have a cash cushion in case something goes wrong. Others have many more variables in their equation than I do that can cause emergencies (children, sick parents, a house or rental properties, etc.). These people have their very own thinking and analysis to do.

In fact, once I reach FIRE, I will probably have no choice but to change my mind. Since my income will depend mostly on the moods of the stock markets, not to mention no longer having a group insurance, I believe that I will sleep better with a certain amount of money set aside.

Ultimately, having an emergency fund has a positive effect on a psychological level, much more than on a financial level. Ed Rempel’s research conclusions explains it perfectly well:

The study showed that holding cash does not protect you. In fact, it often increases your risk of running out of money.

There is an argument that holding cash has a good behavioural effect on investors. With some cash, they may stay invested and avoid the “Big Mistake” of selling their equities while they are down. To the extent this is true, holding some cash may be beneficial for the behavioural effect only.

But cash does not actually protect you. It’s safer not to hold cash.

Considering all of this, I’m aware that I will have to re-evaluate my situation when I get there.

That being said, I would be curious to hear your point of view on the subject. Do you have an emergency fund? How big is it? Have you had to dip into it for an emergency? What kind of emergency was it?

Don’t hesitate to let me know! 🙂

Those of you reading this blog’s articles every week may have been startled a few times whenever I mentioned how I am aiming for $15,300 (in 2021 dollars) in annual retirement expenses. One loyal reader even told me once that he was afraid I’d run out of money before the end of the year.

Also, you have access to my monthly reviews and you’ve probably noticed that I am far from the mark.

I have therefore decided that it’d be relevant to write an article about my current annual expenses. I will also break down how I plan to optimize everything, in order to make $15,300 in annual expenses realistic once I retire.

My Current Expenses

As already detailed in my article about lowering expenses, here is an estimate of my current expenses.

You’ve probably noticed that some expenses are not what one might really consider fixed. However, since I track my expenses every month, I can easily estimate a fairly representative average.

Optimizing Budget Items

You’ve probably noticed that I am currently almost $7,500 overbudget. I am well aware of this. Let’s see how I could optimize my expenses to live on $15,300 per year. 🙂

Housing

For this budget idem, I’ve already talked about what my plan is shaping up in my article about my 2021 goals.

Currently, I am renting a 2-bedroom apartment with my sister. I live about ten kilometres from my workplace. Once I retire, I’ll no longer need to live near the workplace. Although my retirement plans involve quite a bit of travel, I’d still like to have a place to go back to in Quebec.

Thus, the most logical choice for me would be to buy my mother’s house in my small hometown. Since she lives far from civilization, the house is definitely a cheap deal. With the interest rates as they are now, a mortgage on the house would cost me about… $250 per month.

I very freely estimate insurance, taxes and electricity at about $1,000 each per year.

The ideal scenario would be for my mother to continue living there. That way, there would always be someone in the house, even when I’m out exploring the world. My sister is aiming for FIRE as well and could opt for the same kind of arrangement. I could then take care of paying the mortgage, while my mother and sister take care of paying the other house-related expenses, or any other arrangement that would involve sharing expenses.

Car

This particular budget item, as you already know, will be automatically optimized in November 2021 at the latest, when my car loan is fully repaid. This means $10,500 less in annual expenses. 🙂

While I still have a loan on the car, the bank requires I have full insurance. Once the loan is repaid, I may consider changing my insurance shortly thereafter and drop collision and comprehensive coverages. I called my insurer to find out how much my premium would be and I learned it would go down from $577 to $336 per year.

As far as licence and registration are concerned, it won’t change. Obviously, it’s more likely to increase slowly but surely.

Gas could very well increase at times (both the price and my consumption), just as it could remain very stable at other times. I’ll estimate double what I’m paying right now, just to be on the safe side.

Finally, for all maintenance, including oil changes and repairs, I’ll have to plan for a larger amount. My car is starting to age and when I reach FIRE, it may start to need some love! I think it would be reasonable to budget for about $750 a year.

Food

On that front, apart from the normal food cost increase, there should not be a big difference. Fluctuations will mostly happen according to where I’ll be in the world. Food is ridiculously cheap in Southeast Asia, for example. However, feeding myself in Europe could be a whole other story. While I am in Quebec, it will be more or less the same price I am paying now, plus inflation.

I am already careful to buy groceries on sale, in large quantities (economy of scale), I avoid restaurants, I meal prep and I make sure I don’t waste anything. These are all good habits that I intend to maintain. Furthermore, I have been eating keto for three years and I don’t plan to change my diet.

Tentatively, I’ll keep the same amount that I am currently paying.

Subscriptions

I don’t see much change happen here.

For my mobile phone plan, I don’t see any major changes. I currently have a $27 (plus taxes) plan with Fizz that suits me perfectly. Abroad, there is always WhatsApp that will allow me to call or send text messages at no charge, as long as I have access to a wifi.

As for home internet, little change is expected. I find that I am already paying a fair price. Actually, it could even get lower if we ever share the bill with my mother.

For Spotify and Netflix, I don’t think I’m going to unsubscribe, since I use these services extensively and it’ll be useful to me no matter where I am in the world. 🙂

Donations

For this expense, I already donate very little. I certainly don’t think I’ll decrease the amount. At the moment, I also give through deductions at source at work, to the tune of $10 per two weeks. There is therefore a better chance that I will increase my donations to reach an equivalent total of donations.

Cats

For your information, my two cats are immortal. Therefore, this expense item will never change.

Hypothetical Retirement Expenses

So, after all these changes, here is a hypothetical retirement budget:

This is actually a very conservative assumption, as I include all the house-related costs, as if I am not going to split anything with anyone (which I highly doubt). In all honesty, if I am to pay for everything on my own, I would probably choose to rent instead, in the same small village.

Thus, if I were renting, or, as mentioned above, if my mother and sister were paying for the house-related costs, it would be about $3,000 less per year for me.

Accordingly, here is a more optimistic (or realistic) scenario:

Now, do you understand why I think it’s realistic that I can keep my annual expenses under $15,300? 😉

My current expenses are already quite low. As I write this article, I notice how housing and car-related expenses change everything. Once these two big expense items are optimized, I’ll be able to reach a realistic level of spending to achieve my goal. 🙂

Lean FIRE

Also, let’s take a closer look to my hypothetical retirement budget. Whether you take the conservative assumption ($12,776) or the more optimistic assumption ($9,276), it is still a pretty tight budget for many people.

It reminds me a bit of Lean FIRE. Financial 180 explains the concept as follows:

Lean FI is what my wife and I call the point where you can passively cover all your essential expenses, perpetually. Think food, shelter, and bills. This leaves off all the discretionary frills such as travel, eating out at restaurants, Netflix, etc. It wouldn’t be a super fun lifestyle, but you technically could quit work right now and survive forever. I like to think of Lean FI as an emergency fund that can cover infinitely many months of essential expenses.

For those who are intrigued, there is a full Subreddit about Lean FIRE.

In my case, Lean Fire could actually be reached at around $200,000 (or $8,000 in annual expenses), when I leave out Netflix, Spotify, mobile phone plan, etc. It could even be less, if I were to forget about the car and the associated costs, for example. You get the picture.

Not very glamorous, but with some extra income, it’s starting to look like freedom!

Buffer

Of course, I would like to actually do something with my time once I’m retired. Lean FIRE is not my goal. So, I think a buffer is of the utmost importance. By aiming for $15,300 a year, I am therefore planning for a buffer somewhere between $2,500 (according to the conservative assumption) to $6,000 (according to the optimistic assumption). Let’s meet somewhere in the middle with a $4,000 buffer.

In my opinion, this would allow me to do enough activities to keep me busy, in addition to my favourite hobbies that are already inexpensive. That’s the equivalent of $333 a month or $76 a week for activities, restaurants, or others. Considering my current lifestyle, this would be fine with me.

This amount could also absorb other needs, such as clothing, for example. Considering that I already buy most of my clothes used, I don’t foresee big expenses on this front. The buffer could therefore absorb it.

In terms of major expenses that I plan on having during retirement, such as travelling, Travel Hacking will be my friend. My points and miles will allow me to travel at low costs. 🙂

Geographic arbitrage will also be a powerful ally. The beauty of early retirement is that I will have the freedom to go where I want, when I want. It’s getting a little too expensive in France? Perfect, let’s go visit Eastern Europe. I’m starting to bust my budget in Japan? Next destination: Thailand! It’s all about balance. 😉

Never Forget About Inflation

Of course, this $15,300 is in 2021 dollars. I have already mentioned this in other articles, but we must never neglect inflation while doing projections. For example, by applying 2% inflation until 2026, which is the year I expect to reach FIRE, I get :

• 2021: $15,300
• 2022: $15,606
• 2023: $15,918
• 2024: $16,236
• 2025: $16,561
• 2026: $16,892

I can’t wait to see how accurate those projections will be. Many bloggers have actually noticed that their expenses changed very little from one year to the next, either before or after FIRE. So, I may even be too cautious in my projections. Can’t wait to find out! 😉

Killing Two Birds With One Stone

The main advantage of having a low level of annual expense is that I won’t need millions of dollars to cover it. With the 4% rule, that means I would only need a nest egg of about $382,500 in 2021 dollars.

Whereas if I were to start splurging and have to estimate my expenses at $40,000 a year, for example, then I would need literally over $1 million. In fact, to cover $40,000 in annual expenses, I would actually need $50,000 in gross income. And still using the 4% rule, to withdraw $50,000 per year, you need…  1 250 000 $.

Let’s just say that would move up my FIRE date by several years. Personally, I prefer to lower my expenses.

Of course, that’s a worst-case scenario where all income comes from an RRSP and is taxed accordingly. There would be a way to lighten the tax bill by making withdrawals from a TFSA (which I don’t recommend at first) or from a non-registered account. Still, we must always take taxes into consideration.

Which brings me to the second advantage of having low annual expenses. By aiming for $15,300 in annual expenses, I make sure that I pay as little taxes as possible. This amount is actually quite close to the basic personal amounts ($13,808 at the federal level and $15,728 in Quebec in 2021). The tax payable would therefore be really minimal. In fact, it would be $187, according to this calculator.  Of course, that’s if I were to withdraw it all from my RRSP. If I do a happy mix of withdrawal from an RRSP and a non-registered account, then there’d be zero dollars in taxes to pay. 🙂

Long Live Frugality!

So that’s how I plan to live on $15,300 once I retire. Personally, I think it’s realistic according to my personal needs. I spend very little and I don’t think that will change once I retire. The small nest egg needed to cover this amount and the tax advantages encourage me even more to maintain my frugality.

Also, if I ever run out of money in October, like my faithful reader fears, I’ll improvise. I consider myself resourceful and creative enough to find a solution!

I am very curious about how much you expect to spend in retirement. 🙂